Washington, Rates, OTAs Are Top Concerns

If the 1,100 people at last week's Lodging Conference in Phoenix are a bellwether, the hotel industry faces three big issues: the legislative and executive environment in Washington, the industry's failure to raise rates to match the climb in occupancy and the ongoing threat from online travel agencies like Expedia, Travelocity and others.

No matter the topic of the more than 30 panels at the three-day executive retreat, nearly every speaker had an opinion on one or more of these hallmark issues. While it was hard to gauge which subject drew the most passionate talk from speakers and attendees, perhaps it was the current political climate, which many speakers blamed for the industry's inability to shake its doldrums.

“In my 50 years in the hospitality industry, I've never seen Washington as dangerous to business as it is today,” said industry legend Mike Leven, who's now president & COO of Las Vegas Sands Corp. Other speakers, like Choice Hotels' Steve Joyce, think the fault is ours.

“As an industry, we've been very poor at making our case to the public,” he said in a not-so-subtle slam against the AH&LA and other trade groups representing the industry. (Oddly, Best Western's David Kong, current AH&LA chairman, was sitting next to Joyce on stage but never spoke up in defense of the association.) “Any politician needs to know a price will be paid for the kind of rhetoric (that harms the tourism industry). We need to put together a significant war chest to fight back.”

The topic of OTAs drew a more mixed reaction. Some speakers, like IHG's Jim Anhut, believe individual operators need to be more proactive to not be victimized by predatory practices from the OTAs. “It's a valuable distribution channel when used correctly,” said Anhut, the firm's chief development officer in the Americas, “but some franchisees just don't do the math to see what OTA channels are costing them.”

Tom Magnuson, CEO of Magnuson Hotels, was less wary: “We believe OTAs are our best friend. Our independent members just want distribution, and they don't care where it comes from.”

While the inability of most hotels to raise rates continues to rankle many executives, few had any concrete solutions to the problem. Sadly, as STR's Vail Bloom showed in her presentation, industry occupancy was up five percent through August, but rates are down one percent over last year, which was a dismal one.

“We've failed as an industry to recognize our demand strength and react accordingly with increases in rate,” said La Quinta President & CEO Wayne Goldberg. “It's a problem mostly of our own doing.”